New York State Seal

STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

Circular Letter No. 22 (1998)
August 25, 1998


TO:   All Licensed Brokers and Property/Casualty Insurers
RE:   Disclosure of Brokers' Compensation

An alleged market development has recently come to the attention of the Department that appears to warrant scrutiny. The development centers on the allegation that undisclosed compensation, in addition to commissions, is being paid to brokers by insurers as additional compensation for the placing of business without such information being furnished to insureds. Pursuant to Section 2101(c) of the New York Insurance Law ("NYIL"), a broker is the legal representative of the insured. It is the position of the Department that the undisclosed receipt of additional compensation is sufficient to create the perception that brokers are conflicted in their loyalties and that such conduct may constitute a violation of Section 2110 as a dishonest or untrustworthy practice.

Accordingly, pursuant to the sections of law noted above, as well as Article 23 of the NYIL, this Department offers the following guidance.

The Department will review these matters in future market conduct investigations of insurers and brokers.

_________________
Bonnie Steingart
Deputy Superintendent &
General Counsel